Thursday, September 29, 2022

February 2010 Legal Update

 

Regulators Adopt Final Rule Implementing New FASB Standards 166 and 167

Perfection and Priority in Certificates of Deposit

Despite Tough Legal Framework, Banks Can Take Steps to Protect Themselves from Losing Business to a Departing Employee

Upcoming Compliance Dates (New Feature!)

Regulators Adopt Final Rule Implementing New FASB Standards 166 and 167

 
Byron’s Quick Hit: In 2009, FASB adopted new accounting standards 166 and 167. The effect of these standards is to amend GAAP such that some assets that were previously allowed to be carried off the books of financial institutions will have to be consolidated. For banks, this will potentially affect the treatment of participation loans, as well as the securitization of mortgage loans and use of certain SBA loan programs, among other things. The net effect of these changes is predicted to require banks that are affected to raise additional capital due to expected increase in loan loss reserves and other factors.
The federal regulators have jointly adopted a Final Rule implementing FAS 166 and 167. The Final Rule provides an optional 2 quarter complete delay in implementing FAS 166 and 167 for regulatory purposes. In addition, the Final Rule provides a separate and additional 2 quarter phase-in period, whereby the effects of FAS 166 and 167 would be partially implemented.
 
Much of the recent onslaught of bank regulation is intended to address issues that caused the financial and credit meltdown beginning in 2008. Although it could be argued quite strenuously (by me) that most of the increased regulatory burden recently hoisted on banks is misplaced, one area where it seems that some changes may be advisable is accounting standards. 
In an effort to address perceived abuses involving structured finance transactions involving a special purpose entity (“SPE”) (Google “Enron special purpose entity”), the Financial Accounting Standard Board (“FASB”) issued financial standards modifying existing accounting treatment under Generally Accepted Accounting Principles (“GAAP”). On June 12, 2009, FASB finalized Financial Accounting Standard (“FAS”) Nos. 166 and 167. FAS 166 and 167 modify existing FAS 140 and FASB Interpretation 46-Revised (“FIN 46R”), which governed the treatment for structured finance transactions involving a SPE.
Before this article goes any farther, a disclaimer is in order: the author is not an accountant and doesn’t pretend to fully understand the workings of either the old or the revised accounting standards. Further, this article is not intended to represent a full explanation of FAS 166 or 167. YOU SHOULD CONSULT WITH AN ACCOUNTING EXPERT about how these changes will affect your bank. However, this article will discuss these changes generally. Further, it will discuss the new banking regulations that may delay and/or phase in the application of these accounting standards for purposes of your bank regulatory compliance.
On January 21, 2010, the OCC, Federal Reserve Board, FDIC and OTS jointly issued a final rule formally adopting FAS 166 and 167 into the general risk-based and advanced risk-based capital adequacy frameworks. Although FAS 166 and 167 are effective for accounting periods that begin after November 15, 2009, the Final Rule permits banks to delay and phase-in the implementation these new standards. As discussed below, the Final Rule provides an optional two-quarter implementation delay. Further, it allows an additional two-quarter partial implementation of the new standards.
Summary of FAS 166
FAS 166 removes the concept of a qualifying special-purpose entity from FAS 140. In the context of banking, it may have been previously possible for a bank to set up a SPE for loan securitization purposes. So long as an SPE was not owned by the bank whose loans were being securitized, a bank may have been able to transfer ownership of a loan or portfolio of loans, and thereby avoid consolidation of such loans on the bank’s balance sheets for regulatory, accounting and bankruptcy purposes.
In addition, FAS 166 will affect participation loans. FAS 166 provides a new definition of the term “participating interest” in order to establish when an entity may report a transfer of a portion of a financial asset as a sale, thereby removing it from the transferor’s balance sheet. In order to qualify for treating a portion of a participation loan for sale treatment, the transferor must surrender control over the entire financial asset, group of financial assets or a participating interest in an entire financial asset. In the context of participation loans, the transferor and transferee must share proportionately in all of the rights, risks and benefits of the entire financial asset. FAS 166 further clarifies that a transferred financial asset must be placed beyond the reach of the transferor, its consolidated affiliates, agents and creditors. 
Also, FAS 166 removes the special provisions in FAS 140 for guaranteed mortgage securitizations, thereby requiring them to be treated the same as any other transfer of financial assets.
Summary of FAS 167
FAS 167 amends FIN 46R, which dealt with the consolidation of Variable Interest Entities (“VIEs”). VIEs have been used as a close cousin of the SPE in which the investor holds a controlling interest that is not based on having the majority of voting rights. FAS 167 requires an entity to perform an analysis to determine whether its interest in the VIE gives it a controlling financial interest. The analysis identifies the primary beneficiary of a VIE as the entity that has both: (i) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance; and (ii) the obligation to absorb losses of the VIE or the right to receive the significant benefits from the VIE. If an entity is the primary beneficiary, the VIE must be consolidated by the primary beneficiary. In addition, a consolidation will occur if an entity has an implicit financial responsibility to ensure the VIE operates as designed. This analysis is ongoing. In other words, if circumstances change, the above analysis may change as well.
Although it is speculated that the largest effect of the accounting changes will be to increase consolidation for banks, in one area FAS 167 may actually have the opposite effect. Currently a bank that assumes the majority of the expected losses for a VIE must consolidate. However, if another company controls all the significant economic operations, it is now possible to de-consolidate in that instance.
Why FAS 166 and 167 Are Important to Banks
While FAS and 166 and 167 affect the accounting rules for all entities, the largest impact of these rules is likely to fall on banks, largely because of their impact upon regulatory capital. For banks that retained servicing rights and some portion of the capital structure of deals they have sponsored in the past, these changes could mean that the entirety of the sold assets will be brought back into the bank’s balance sheets. While FAS 166 and 167 only affect accounting statements going forward, in some instances they do apply to both past and future transactions. Banks faced with this problem may be able to deal with some of these issues by selling off one portion or the other of a deal, where it is the combination of the two that will require consolidation.
It is speculated that the results of these accounting changes could require US banks to add hundreds of billions of dollars in additional capital or force them to sell assets.
Loan Participations. Loan participations that already exist are grandfathered under FAS 166, so it will not require consolidation for existing loan participations. However, banks should ensure that loan participations entered into beginning on January 1, 2010 comply with FAS 166 in order to attain sale treatment, allowing the bank to take sold portions of the assets off its books. Importantly, under FAS 166, to qualify as a participating interest, all parts that are sold must be pro rata in ownership, for both principal and interest, and equal in priority of cash flows. Thus, up-until-now accounting for participation loans including LIFO, FIFO, subordination and interest-only strips will not qualify as participating interests. Also, these interests cannot be sold with recourse.
SBA Loan Programs. Banks that participate in loan programs with the Small Business Administration or Government Sponsored Entities may not now qualify for sale treatment, depending on the structure of the program.
SBA Loans. In some instances, banks sell off guaranteed portions of SBA loans and retain non-guaranteed portions. If such a transaction provides limited recourse against the bank, sales treatment may not be possible or may be delayed until the recourse guarantee period is over.
Final Rule
Under the Final Rule, each of the regulatory agencies adopts the standards contained in FAS 166 and 167 for their respective regulated banks. Several commenters to the proposed rule requested that if the agencies were going to adopt FAS 166 and 167, that they have a prolonged phase-in, in order to minimize what is feared to be a lessening in the availability of capital available for lending. The American Bankers Association requested a 3-year phase-in period, along with other suggested changes. However, the adopting agencies instead opted for immediate implementation of the new accounting standards with an optional phase in period of up to 4 quarters.
The Final Rule provides an optional transition mechanism to delay and phase in the impact of FAS 167 on risk-weighted assets. NOTE: The transition mechanism WILL NOT apply to the leverage capital ratio. A banking organization may elect to delay the impact of FAS 167 on risk-weighted assets for the first two quarters after the date in implements FAS 166 and 167. Thereafter, a bank that opted for the delay again has an option to phase in the risk-based capital requirements over the following two quarters. The transition mechanism is not available for assets of a VIE to which a bank has provided implicit support.
Under the risk-based capital rules, the amount of the allowance for loan and lease losses (“ALLL”) that may be included in tier 2 capital is limited to 1.25% of total risk-weighted assets. For the first two quarters following implementation of FAS 166 and 167, the Final Rule permits a bank to include without limit in tier 2 capital the full amount of the ALLL for assets that have been excluded under the transition mechanism. For the following 2 quarters, bank that elects the transition mechanism may include in tier 2 capital 50% of the inclusion amount. Thereafter, a bank would be required to count toward the 1.25% tier 2 capital limit all of the ALLL associated with the assets of the VIE.
 
 
Perfection and Priority in Certificates of Deposit
Byron’s Quick Hit: Although CD’s are common and well known, in the context of the UCC there are actually 2 different types of CDs: certificated CDs (instruments) and book-entry CDs (deposit accounts). The rules for perfection and priority in instruments and deposit accounts are not the same. For certificated CDs, it is advisable for a secured party to maintain physical possession of the instrument in order to ensure priority. For book entry CDs, a bank must maintain “control” of the CD to ensure priority. If the CD is maintained at the bank extending the credit to the debtor, the bank has control. Otherwise, the bank must enter into a control agreement with the bank where the CD is on deposit and the borrower.
As always, when a bank makes a loan, its foremost concern is being repaid. To this end, customers may offer all kinds of collateral. How a bank is perfected and maintains priority in any particular item of collateral is most often determined under the Uniform Commercial Code, and certificates of deposit (“CDs”) are no exception. However, when we speak of CDs in general, we are actually potentially referring to two different types of collateral under the UCC and obtaining and maintaining priority in these different types of CDs is not identical.
Historically, CDs were physical instruments, often with an official seal. They could even be negotiable, in that ownership of the certificate could be transferred by virtue of the owner signing over their rights to the CD to another. Importantly, in order to obtain cash for these instrument-CDs, the CD itself would have to be presented to the issuing bank, which would then redeem it for cash. 
Over recent decades the growing trend has been away from the instrument-CD in favor of the book entry CD, whereby just like a checking or savings account, the record of the customer’s interest in a CD is simply reflected on the records of the bank and the statements of the customer. There are potential advantages of a book-entry CD over a certificated CD: (i) the bank doesn’t have to hassle with the expense and trouble of creating the official certificate, and (ii) because the only records necessary to deal with the CD are maintained at the bank, there is no risk of the customer losing the certificated CD and dealing with issues that arise when this occurs.
Perfection and Priority in Certificated CDs: Possession Required
A traditional certificated CD clearly falls under the definition of “instrument” under the UCC. In this regard, “instrument” is defined at 12A Okla. Stat. § 1-9-207(a)(47) as follows:
(A) “Instrument” means a negotiable instrument or any other writing that evidences a right to the payment of a monetary obligation, is not itself a security agreement or lease, and is of a type that in ordinary course of business is transferred by delivery with any necessary endorsement or assignment.
 
(B) “Instrument” includes:
 
(i) an instrument as defined in subparagraph (A) of this paragraph, whether the instrument is subject to Section 3-104 of this title because it is not payable to order; and
 
(ii) a writing that contains both an acknowledgment by a bank as defined in paragraph (8) of this subsection that a sum of money has been received by the bank and its promise to repay the sum of money, which is considered a certificate of deposit by the bank issuing it, even if the writing provides that it is nontransferable or uses similar language.
 
(C) The term does not include:
 
(i) investment property;
 
(ii) letters of credit; or
 
(iii) writings that evidence a right to payment arising out of the use of a credit or charge card or information contained on or for use with the card.
 
                In order to perfect a security interest in an instrument, a creditor may perfect in one of two ways: (i) by possessing the instrument, or (ii) by filing. However, for reasons fully discussed herein, the only way for a creditor to ensure that it will retain PRIORITY in the certificated CD is through possession. Thus, possession is the preferred option.
 
                Perfection by filing is allowed for an instrument under 12A Okla. Stat. § 1-9-312(a). This is a change from the pre-2001 version of the UCC which only provided for perfection by possession of an instrument. Perfection via possession of an instrument is authorized by 12A Okla. Stat. § 1-9-313(a). Perfection by possession requires that the secured party, or someone who acknowledges that she is acting exclusively for the secured party, take physical possession of the instrument. 
 
Practical Necessity of Possession
 
                Although a secured party may perfect its interest in a certificated CD either through filing or possession, practical issues dictate that a prudent creditor insist on possession. The reason for this is priority rules contained at 12A Okla. Stat. §§ 1-9-330. Section 1-9-330(d) provides as follows:
 
Except as otherwise provided in subsection (a) of Section 1-9-331 of this title, a purchaser of an instrument has priority over a security interest in the instrument perfected by a method other than possession if the purchaser gives value and takes possession of the instrument in good faith and without knowledge that the purchase violates the rights of the secured party.
 
Under this priority provision, a bank with a valid, perfected lien in an instrument will lose to bona fide purchaser in possession. The only way to eliminate the risk that your borrower will not sell his certificated CD to another party is to possess it.
 
Perfection and Priority in Book-Entry CDs: “Control” Required
 
                Most banks now open CDs as any other deposit account. The CDs have a deposit agreement that governs it. When the CD is opened, the bank credits an account on its system that is designated a certificate of deposit. Although the customer will obtain documents related to the CD, including possibly statements, in this context the CD will not be documented by an instrument. In this event, a CD falls within the UCC definition of “deposit account.” 12A Okla. Stat. § 1-9-102(a)(29) states:
 
"Deposit account" means a demand, time, savings, passbook, or similar account maintained with a bank… The term does not include investment property or a deposit account evidenced by an instrument.
 
Applying the above definition, the determiner of whether a CD is classified as a deposit account or an instrument is whether the CD is evidenced by an instrument. If it is not, it is a deposit account. The Official Comment No. 12 to UCC § 9-102 makes this result clear:
 
Deposit accounts evidenced by Article 9 “instruments” are excluded from the term “deposit account.” In contrast, former Section 9-105 excluded from the former definition “an account evidenced by a certificate of deposit.” The revised definition clarifies the proper treatment of nonnegotiable or uncertificated certificates of deposit. Under the definition, an uncertificated certificate of deposit would be a deposit account (assuming there is no writing evidencing the bank’s obligation to pay) whereas a nonnegotiable certificate of deposit would be a deposit account only if it is not an “instrument” as defined in this section (a question that turns on whether the nonnegotiable certificate of deposit is “of a type that in ordinary course of business is transferred by delivery with any necessary indorsement or assignment.”)
 
                As with any security interest, a prudent lender must not only ensure that it is perfected in its collateral, but that it maintains priority against other perfected security interest holders. The applicable provision controlling priority for deposit accounts is found at 12A Okla. Stat. § 1-9-327, which states:
 
The following rules govern priority among conflicting security interests in the same deposit account:
 
(1) A security interest held by a secured party having control of the deposit account under Section 1-9-104 of this title has priority over a conflicting security interest held by a secured party that does not have control.
 
 
(3) Except as otherwise provided in paragraph (4) of this section, a security interest held by the bank with which the deposit account is maintained has priority over a conflicting security interest held by another secured party.
 
(4) A security interest perfected by control under paragraph (3) of subsection (a) of Section 1-9-104 of this title has priority over a security interest held by the bank with which the deposit account is maintained.
 
Pursuant to the statutory language, a secured party having control under Section 1-9-104 will have priority over a conflicting security interest in the same deposit account that does not have control. Section 1-9-104 provides as follows:
(a) A secured party has control of a deposit account if:
(1) the secured party is the bank with which the deposit account is maintained;
(2) the debtor, secured party, and bank have agreed in an authenticated record that the bank will comply with instructions originated by the secured party directing disposition of the funds in the deposit account without further consent by the debtor; or
(3) the secured party becomes the bank’s customer with respect to the deposit account.
(b) A secured party that has satisfied subsection (a) of this section has control, even if the debtor retains the right to direct the disposition of funds from the deposit account.
                Putting all of this together, a bank will generally obtain control over a CD in one of two ways: (i) by virtue of having the deposit account with the debtor-customer; or (ii) entering into a tripartite control agreement related to the CD with another bank in which the CD is deposited and the debtor. If possible, the first of these ways is preferable. As explained in the Official Comment to UCC § 9-104, “The effect of [9-104(a)(1)] is to afford the bank automatic perfection. No other form of public notice is necessary; all actual and potential creditors of the debtor are always on notice that the bank with which the debtor’s deposit account is maintained may assert a claim against the deposit account.”

Despite Tough Legal Framework, Banks Can Take Steps to Protect Themselves from Losing Business to a Departing Employee
 
                When I was working in a law firm, one of my favorite issues to get involved with was non-compete and non-solicitation agreements in the context of a former employer-employee situation. These cases were always at the very least very interesting, and often hard fought on both sides. At different times, I represented both the employer and the employee. In all instances, the dispute was very emotional. From the perspective of the ex-employer, they are dealing with a former employee whom the employer believes is breaching his contract and by doing so is taking away business and customers. From the perspective of the ex-employee, his big, bad, old employer is now trying to take away his livelihood based on a contract that was foisted upon him and which he had no choice but to sign. 
 
In addition to being emotionally charged, enforcement of non-compete and/or non-solicitation agreements present difficult questions of law. A large number of cases involving non-competition or non-solicitation agreements comes from businesses within the financial sector, including banks. For better or worse, the financial sector is one in which just one or two highly connected and highly effective employees can bring in a great deal of business, making a serious impact on the bottom line. Further, banking is an area where employees frequently move from an old employer to a direct competitor in the same market.
 
In order to guard against sustaining losses in business and profits upon the departure of a valued employee to a competitor, a business may request that its employee enter into an agreement whereby the employee agrees to refrain from soliciting business from its customers after he leaves. Alternatively, a business and employee may agree that the employee will not compete in the same geographical area within a period of time following termination of the employment relationship.
 
As discussed below, courts in the United States have generally erred on the side of allowing competition when presented with questions in this area. Thus, in a large number of cases, courts have stricken down non-compete or non-solicitation agreements on public policy grounds, often finding that the contracts present unreasonable restraints on trade that are harmful to the public at large, not just to the participants to the agreement in question. Historically, Oklahoma courts have followed this general trend. Further, Oklahoma is somewhat unique in that the legislature has adopted statutes that specifically adopt the premise that with certain limited exceptions, contracts that are in restraint of trade are void. This article will discuss this statutory authority and related issues, and will finally address some things that your bank may want to consider to protect yourself from ex-employees raiding their business.
 
Oklahoma’s Statutory Framework
 
The Oklahoma legislature enacted revised 15 Okla. Stat. § 217, dealing with contracts in restraint of trade in 1989. Although there was certainly substantial case-law in Oklahoma prior to the adoption of this statute, now the legal framework for non-competes and non-solicitation provisions begins here. 15 Okla. Stat. § 217 provides:
 
Every contractbywhichanyoneisrestrainedfromexercisinga lawfulprofession,tradeorbusinessofany kind,otherwisethanas providedby Section218and219ofthistitle,orotherwiseas provided by[15 Okla. Stat. § 219A], is to that extent void.
 
Sections 218 and 219 deal with restraints on trade in the context of the sale of a business or the dissolution of a partnership. These provisions will normally not come into play in the context of the employer-employee dispute. However, in 2001, the Oklahoma legislature adopted Section 219A, which deals directly with contracts in restraint of trade in the context of employer and employee. Section 219A provides:
 
A.  Aperson who makes an agreement with an employer . . . not to competewiththeemployerafter theemploymentrelationshiphas beenterminated,shallbepermitted to engage inthesamebusiness…aslongastheformeremployeedoesnotdirectly solicitthesaleof goods,services oracombinationofgoodsandservicesfromthe established customers of the former employer.
 
B.   Any provisioninacontractbetweenanemployerandan employee in conflict with the provisions of this section shall be void and unenforceable.
 
                Applying this legislative language, you would think it would be pretty easy to interpret employer-employee non-compete/non-solicitation agreements. In some respects it is. For example, it is nearly impossible to enforce a true non-competition agreement in the context of the typical employer/employee situation. Courts are simply not willing to tell an employee that he cannot go to work for a competitor. One part of the reasoning for reaching this decision is that in many instances, the enforcement of a true non-competition agreement would result in the employee’s inability to go to work for anyone else in his chosen profession. However, the statute leaves several important issues unanswered. Courts have continued to sculpt the framework with which these issues are decided. 
 
                One issue that remains undecided either by the statute or subsequent caselaw in Oklahoma is timing of execution of a non-solicitation agreement. For example, in other states, it has been successfully argued that in order for a non-solicitation agreement to be enforceable, it must either be signed at the time an employee comes on, or, if signed later at the request of the employer, must be supported by separate consideration, e.g., a raise, bonus, stock options, etc. See, e.g., Young v. Mastrom,Inc.,392S.E.2d446(N.C.Ct.App.1990). Thus, where an employer makes a decision that it is going to have all of its employees sign a non-solicitation agreement (at pain of losing a job if the employee refuses), unless the employer offers separate consideration for signing the agreement, it opens the door for the argument that there was insufficient consideration, resulting in the agreement being thrown out. Generally, courts have reached the opposite conclusion when it comes to non-solicitation agreements that are executed when an employee first accepts his position, finding that in those instances, there is sufficient consideration.
 
                Another issue that remains unsettled by the language of the statute is the length of time that a non-solicitation agreement can be enforced. In considering these issues, courts will generally only enforce a restriction that is reasonably necessary to protect the valid business interests of the employer. In some jurisdictions, courts have found that a non-solicitation agreement cannot be enforced for longer than a year. However, in Oklahoma, it seems that an otherwise valid non-solicitation provision can be enforceable for up to two years. See, e.g., Brown v. Stough, 292 P.2d 176 (Okla. 1956).

                Another important aspect of interpreting a non-solicitation provision is determining what is and is not “solicitation.” The language of Section 219A only purports to allow the restriction of the “direct solicitation” by a former employee of the employer’s customers. Thus, it is fair to ask whether an employer can restrict a former employee from accepting business from its current or former customers. Generally, courts will not allow an employer to restrict the rights of its customers. Thus, it is typically not possible to prohibit an employee from accepting calls and thereafter accepting business from the employer’s customers. The distinction is that accepting a call is very different from making a call or otherwise contacting one’s former customers that were served at a former employer. However, an employer and employee are clearly allowed to agree that an employee will not call on or solicit his former customers.  
 
Uniform Trade Secrets Act
 
                Importantly, it should be noted that absent a valid non-solicitation agreement, an employee is free under the law to solicit the customers and business of his former employer once he moves to a competitor. However, even absent a valid non-solicitation agreement, that does not mean that an employee is free to misappropriate his former employer’s trade secrets.
 
                In 1986, Oklahoma adopted the Uniform Trade Secrets Act, at 78 Okla. Stat. §§ 85, et seq. This Act prohibits the misappropriation of trade secrets. Misappropriation generally means the acquisition or disclosure of a trade secret without the consent of the party that owns the trade secret. Importantly, this Act can apply in the former employer/employee context, even where there is no agreement of any kind between the parties. If a former employee misappropriates a trade secret, his actions can be enjoined and damages can be sought.
 
                The heart of the matter here is whether the information that is obtained or disclosed by an ex-employee is a trade secret. The Act defines a trade secret as follows:
 
“Trade secret” means information, including a formula, pattern, compilation, program, device, method, technique or process, that:
 
a. derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and
 
b. is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
 
                This definition is subject to argument. However, there are a few established principals that can generally be relied upon when discussing the employer/employee relationship. First, caselaw establishes that information concerning the identity of an employee’s ex-customers at his former employer is not a trade secret, especially information that is located inside an employee’s head. Simply put, an employee cannot be required to erase his memory. Conversely, it is pretty clear that where an exiting employee prints or downloads a list of all customer information of his ex-employer, including account information, etc., he has clearly obtained information that is subject to protection under the Uniform Trade Secrets Act. However, the disputes in this arena will almost always fall in between these two extremes.
 
                For an employer hiring a new employee away from a competitor, this presents some practical issues. I have advised those in this situation to encourage someone that they are hiring away from a competitor to be careful not to bring any documents, files or information of any kind from her old employer. Conversely, my advice has also been that when an employee comes to work from a competitor, that employee is free to sit down on his first day on the job and write down a list of former customers that he wishes to call on. If she remembers their phone numbers, write those down too. Further, if information is available from public sources, like the phone book, an employee may fill in the gaps of his memory concerning contact information. Absent a valid non-solicitation agreement, the employee is free to call on those customers of his former employer.
 
One area of concern in this technological age is information that is stored on a cell phone. Arguably, information on a cell phone that is downloaded from a former employer’s software (including Microsoft Outlook) is in the gray area. Extreme caution should be exercised to purge this arguably suspect information before a new employee comes on.
 
Practical Suggestions for Banks:
 
1.             Oklahoma banks may wish to consider asking their employees to execute non-solicitation agreements, whereby the employee will agree to maintain a “hands off” policy toward their customers should the employment relationship be terminated by either party. Care should be taken, including consultation with an attorney familiar with these topics, when drafting any such agreement.
2.             If a non-solicitation agreement is desired for already existing employees, banks should consider tying the agreement to separate consideration other than just continued employment.
3.             Banks should take great care when hiring employees away from a competitor and should review whether the employee may be subject to a valid non-solicitation or other agreement that may affect her ability to perform her new job.
 
Upcoming Compliance Dates (New Feature!)
2/14/2010 – Deadline to Comply with Revisions to Reg Z for Higher Education Opportunity Act (See January 2010 Legal Update)
2/22/2010 – Deadline to Comply with Provisions of Credit Card Act (See January 2010 Legal Update)
3/1/2010 – HMDA and CRA Annual Filings Due
4/1/2010 – Escrow Required for HPML Applications Received after April 1 (except manufactured housing) (See September 2009 Legal Update)
6/1/2010 – Compliance Deadline for new Reg GG (Unlawful Internet Gambling Enforcement Act (“UIGEA”) mandatory (delayed from December 1, 2009) (See November 2009 and December 2009 Legal Updates)
7/1/2010 – Deadline to comply with new Reg E Opt-in Requirement for Overdraft Protection for ATM and One-Time Debit Card Transactions (See December 2009 Legal Update)
7/1/2010 – Deadline to comply with new Reg Z Changes to Open-End Credit (will be covered in March 2010 Legal Update)
7/1/2010 – Deadline to comply with new regulations under Fair and Accurate Credit Transactions Act (“FACT Act”) (will be covered in March 2010 Legal Update)